LPN Wisdom: Real Estate Market Expected to Recover in the Second Half of 2020

 

LPN Wisdom predicts that the real estate market will continue to grow in the second half of 2020 due to the easing of lockdown measures and pricing strategies from developers that stimulate purchasing power in the market. This has resulted in a total revenue growth of 4.36% for 36 real estate companies in the second quarter of 2020 compared to the same period in 2019.

Mr. Prabhan Sak Raksaiwan, Managing Director of LPN Wisdom and Solutions Co., Ltd., a research and consulting company in real estate development under L.P.N. Development Public Company Limited, stated that the real estate market showed signs of recovery in June after the continuous easing of lockdown measures, leading to a gradual improvement in purchasing power. Consequently, sales and revenue recognition for real estate developers increased during the second quarter of 2020.

According to data collected by LPN Wisdom, the total revenue of real estate companies listed on the Stock Exchange of Thailand in the second quarter of 2020 was 72,822.65 million baht, an increase of 4.39% compared to the same period in 2019. This growth is attributed to marketing strategies and price adjustments to meet existing purchasing power in the market. However, the overall net profit of all 36 companies showed a declining trend, with a total net profit of 4,191.53 million baht in the second quarter of 2020, down 54.34% compared to the same period in 2019.

In the first half of 2020, the total revenue of all 36 companies was 143,202.37 million baht, a decrease of 19.27% compared to the same period in 2019. The net profit during the first half of 2020 was 10,714.80 million baht, down 55.11% compared to the same period in 2019.

The decline in revenue and profits of real estate developers in the first half of 2020 aligns with the economic downturn, which saw a 6.9% decrease in growth during the first half of 2020, with the lowest drop of 12.2% in the second quarter of 2020, according to the National Economic and Social Development Council.

“The second quarter of 2020 was marked by the outbreak of the new coronavirus strain 2019 (COVID-19), leading to predictions of reduced purchasing power in the real estate market due to lockdown measures. Developers adapted by employing marketing strategies to stimulate purchasing power, which influenced consumer and investor decisions in the market, resulting in a continuous influx of purchasing power despite the prevailing economic situation. This reflects the existing demand for housing and purchasing power in the market, especially when product prices have adjusted to affordable levels,” Mr. Prabhan stated.

Research from LPN Wisdom indicates that condominiums priced below 3 million baht in locations near the BTS line or easily accessible areas, particularly in the Klong San-Wongwian Yai area near the blue line from Bang Sue to Tha Phra, have received positive market responses with an average sales rate of 30-50% of the project value. Meanwhile, townhouses and duplex homes priced between 2-5 million baht in convenient locations near the BTS, roads, and public transport, such as the On Nut-Phatthanakan area, have average sales of 15-18% of the project value. Detached houses priced between 6-20 million baht have also been well-received, with average sales of 10-13% of the project value in recent times. Additionally, the value of housing loans in the first half of 2020, according to the Bank of Thailand, showed an average growth rate of 4.2%, reflecting the growth rate of the real estate market during the first half of 2020.

As the real estate market begins to improve following government measures to ease economic activities, developers are gradually launching new projects in the third and fourth quarters of 2020. It is estimated that approximately 31,000 to 41,000 new units will be launched in Bangkok and its vicinity during the last five months of 2020, representing a value of about 174,000 to 189,000 million baht, an increase of 20-34% compared to the first seven months of 2020, which saw 33,741 new units valued at 140,640 million baht. In July 2020 alone, there were 5,400 new projects, a 47% increase compared to June 2020, with a value of 19,577 million baht, up 8% from June 2020.

LPN Wisdom estimates that there will be approximately 65,000 to 75,000 new units launched in Bangkok and its vicinity in 2020, valued at around 315,000 to 330,000 million baht, representing a decrease of 25-30% compared to 2019, which saw 110,000 new units valued at 440,000 million baht.

Horizontal Development on the Rise

 

“The trend for new project launches in the second half of 2020 indicates that most developers will focus more on horizontal housing, while continuing to delay condominium launches to meet market demand and manage company cash flow,” Mr. Prabhan stated.

However, real estate developers still have marketing campaigns to reduce existing inventory, especially in the condominium segment. According to the first-half performance report of 2020, 36 real estate companies listed on the Stock Exchange of Thailand had remaining inventory and ongoing projects valued at 601,441.55 million baht, accounting for approximately 70% of the total inventory and ongoing projects in the market, which will take about 36-50 months to sell.

“Currently, there are 90,561 unsold condominiums in the market as of the end of the second quarter of 2020, including 17,645 completed and ready-to-move-in units, which will take about 50 months and 10 months to sell, respectively. This has led most real estate developers to delay launching new condominium projects in the second half of 2020, while there are 12,994 completed horizontal housing units available in the market, which will take about 6 months to sell. Thus, new project launches in the second half will focus more on horizontal developments rather than condominiums,” Mr. Prabhan concluded.